Merck settles complaints that it overcharged Medicaid, pays $670 million

WHITEHOUSE STATION, N.J. When Merck recently released its expected 2008 earnings, the company tried to bury a $670 million charge it took to settle federal and state claims that the company overcharged Medicaid for prescription medicines, according to the Wall Street Journal.

Drug companies are suppose to sell drugs to Medicaid at the best price they offer to any customer. This is in relation to normal pricing which is, when a drug maker offers a steep discount of 90 percent or more to a hospital in exchange for a guaranteed market share of certain medication, but without informing Medicaid. The only exception to this rule is, selling drugs to charitable organizations.

Merck was first investigated for this back in 2002 and has been joined by 19 drug companies including GlaxoSmithKline and AstraZeneca.

On the plus, Merck said it would have a fourth quarter gain of $450 million from insurance proceeds related to the Vioxx liability litigation.

Part D subscribers likely to see drug choices diminish

WASHINGTON Beneficiaries of Medicare Part D are likely to see their drug choices drop next year, as the government has culled hundreds of products from a list of approved drugs.

On average, the number of drugs offered by the 10 insurers with the largest enrollment shrank by 26 percent from this year to next, according to data analyzed by Washington consulting firm Avalere Health. Four of the top five plans have seen their drug coverage cut by at least 30 percent.

UnitedHealth and Humana both saw drops from more than 3,750 drugs to just more than 2,620, Avalere’s analysis shows. Even so, the two insurers still have among the largest drug lists of the 10 biggest insurers. UnitedHealth spokesman Daryl Richard pointed out that even with the drop, the company’s Medicare Rx Preferred plan covers “100 percent of the drugs” on Medicare’s approved list.

The drop came mainly because of changes made by Medicare, which shrank the list of drugs it will pay for, culling those that have been pulled by the FDA, are no longer being made, had duplicative billing codes or were drugs deemed “less than effective” by the FDA.

Medicare officials and the insurers say most beneficiaries are unlikely to be affected. Enrollees taking drugs that were pulled will usually be able to find alternates or can go through an appeals process to try to stay on their current drugs, they said.

“Most of those [removed] drugs were not used,” said Jeff Kelman, chief medical officer for Medicare’s Center for Beneficiary Choices, in a USA Today article.

“As the Part D program develops, the size of the formulary is becoming more aligned with utilization patterns, consumer preferences, health outcomes and value for consumers,” Humana spokesman Tom Noland said.

Avalere’s Jon Glaudemans said the enrollees should check the drug lists of plans they are considering before signing up, to see if the medications they take are included. The deadline for enrolling is Dec. 31. “Every year, insurers revise their formularies, and every year, beneficiaries should reassess their choices,” he said.

Walgreens releases November sales data

DEERFIELD, Ill. A weak start to the holiday sales season, a rise in lower-price generic drug introductions, pressures on children’s cough-cold products and other factors combined to slow the growth momentum at Walgreen Co. in November, but the company still eked out modest same-store sales gains amid the uncertainty.

Walgreens reported November sales of $4.77 billion, marking a 9.5 percent increase over the same month in 2006. But sales in comparable stores rose just 4.4 percent.

Pharmacy sales rose 10.6 percent, but the replacement of some big-selling brand name drugs with lower-price generics this year held comp-store pharmacy sales to a 5.5 percent gain—modest by Walgreens standards. “Comparable pharmacy sales were negatively impacted by 4.3 percentage points due to generic drug introductions in the last 12 months,” the company reported today.

Total prescriptions filled at stores open more than a year increased 3.1 percent, Walgreens noted, and pharmacy sales accounted for 65.1 percent of total sales for the month.

At the front end, comp-store sales rose a relatively meager 2.6 percent in November. Walgreens attributed the growth slowdown to “weakness in seasonal categories; aggressive pricing on digital photo prints; the withdrawal from the market and cautions on the use of cough and cold products for children 6 and under; and a mild early flu season compared to last year.”

Among the bright spots at the front end: consumables and everyday electronics, the company reported.

“Although the weak economic environment may have impacted early holiday sales, we believe the economy will benefit drug stores late in the Christmas season as customers take advantage of our wide selection of products and our convenient locations,” said Walgreens chairman and chief executive officer Jeff Rein. “That’s typical of our past experience.”

Rein also pointed out that the specials offered in Walgreens’ circular advertising in November “didn’t offer the deep discounts that other retailers promoted.”

Calendar year-to-date sales were $49.95 billion, an increase of 11.7 percent over the same period last year. For the first quarter of fiscal 2008 ended Nov. 30, Walgreens’ same-store sales rose 5.4 percent, with total sales up 10.2 percent from first-quarter 2006, to $14.0 billion.

Walgreens said it opened 95 stores in November, including eight relocations. The company also acquired three stores and closed eight, ending the month with 6,141 drug stores (including 93 home care division locations, 10 specialty pharmacies and three mail service facilities) in 49 states and Puerto Rico, versus 5,580 a year ago. Franchisees of Option Care, a wholly owned subsidiary of Walgreens, are not included in Walgreens’ store count.

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